Employers Mutual Insurance v. Board of County Commissioners , 102 Colo. 177 ( 1937 )

THIS is an action against Pitkin county, Colorado, to recover on securities issued by the county and consisting of three of its bonds with one interest coupon attached to each. The district court having entered a judgment in favor of the county, the bondholder brings the case here for review and asks for a reversal.

The bonds are refunding bonds. These and the coupons are in the usual form, all maturing on October 1, 1931, and containing the county's absolute promise to pay. Each instrument constitutes a complete contract in itself, and contains a provision that it is payable at the office of the county treasurer or at the banking house of Kountze Brothers in New York City at the option of the holder upon presentation of the particular bond or coupon. The securities are admittedly valid. Moreover, a tax had been duly levied and collected for the purpose of raising the sum requisite to pay these and certain other bonds and coupons maturing on October 1, 1931. It is conceded that of these funds an amount sufficient to pay all securities falling due on this date had been deposited to the credit of Pitkin county by the county treasurer in the above-named banking house of Kountze Brothers at New York City.

Originally the pleading of the plaintiff bondholder contained allegations to the effect that a demand for payment was made upon, and was refused by, the county treasurer in Aspen, as well as allegations that the bonds and coupons were previously presented for payment at the Kountze Brothers bank in New York and that the payment thus demanded was then and there refused. Kountze Brothers went into receivership on October 13, 1931. The record demonstrates conclusively that the plaintiff was in error when making its original allegations to the effect that the securities had been presented for payment at Kountze Brothers'. As a matter of fact, the bondholder delivered the securities in question to the First National Bank of Denver for collection on October 15, 1931. The bank, like many other banks, at various times had in due course received bonds and coupons for collection, including securities payable at Kountze Brothers'. The First National Bank's correspondent in New York was the New York Trust Company. On October 13, two days before, the Trust Company had sent the First National Bank a telegram stating that the former "will charge and hold all coupons payable at Kountze Brothers pending further information regarding receivership." Plainly, this did not relate to the securities involved in the case at bar, for the bonds and coupons here sued upon could not, under the evidence before us, have been in New York at that time.

The uncontradicted evidence shows that no presentation or demand for payment of the securities here involved was made in New York City at all, but that on October 18 or 19, 1931, the bondholder made demand upon the county treasurer at his office in Aspen, the county seat of Pitkin county, for payment of the amount due, and that payment was refused.

Such being the state of the evidence at the trial, the bondholder asked and obtained leave to amend its pleadings accordingly, over the objection of the county, which assigns cross-error thereon. In other words, the issue, in so far as it dealt with Kountze Brothers, was entirely eliminated, and the pleadings were limited to the demand made in Aspen.

From the standpoint of the county it is, of course, all-important to determine — on its aforesaid assignment of cross-error — Whether the trial court erred in permitting the plaintiff's pleadings to be amended so as to conform to the plaintiff's proof, which in the present instance is not controverted in the slightest degree. If there was reversible error in that, it would be necessary to restore to the plaintiff's complaint and replication the allegations as to presentation and demand for payment in New York City, allegations which in the light of undisputed evidence were erroneous and untrue. On the other hand, if the district court did not commit reversible error in that regard, the elaborate arguments based upon Kountze Brothers' alleged relation of agent to the plaintiff bondholder are beside the question. This point, then, as to whether or not the amendment was reversible error, is the first one calling for a decision.

[1] 1. It is elementary that a trial court has the right and duty to exercise its sound discretion in permitting or refusing the amendment of the pleadings in any case to correspond with the evidence adduced. Pleadings are the means provided by the law to enable a court to ascertain the claims of the respective parties to a justiciable controversy. Such claims are to be presented according to the actual facts. The liberal provisions of our Code for amending pleadings were consciously framed for the purpose of preventing falsehood or mistake from overcoming truth and justice by the sheer rigidity of ancient forms. In view of the clear, convincing and conclusive evidence, leading to the inevitable inference that counsel for the plaintiff originally labored under a wrong conception of the facts, it was proper for the trial court to allow the plaintiff to amend by substituting the truth for the previous error. Not only was it an exercise of reasonable discretion to allow it, but it would have been an abuse of discretion not to do so. We therefore hold the cross-error to be without merit.

[2] 2. Taking the pleadings, then, in their amended version, and taking the evidence according to the actual facts shown by unrefuted contemporaneous documents and by the failure of the county to contradict any material part of the case as presented by the amended pleadings and the evidence in support thereof, we do not understand how the trial judge, when about to enter judgment in favor of the defendant county, could justify by the record before us the words he uttered as follows:

"Now in this case the bonds were payable at the office of the county treasurer or at Kountze Brothers, at the option of the holder. The holder remaining quiet, it became the duty of the treasurer to do one of the two things and he sent the money to Kountze Brothers. It was the option of the bondholder that was exercised and not that of the Treasurer. He had none. Judgment will be for the defendant County, with costs."

The bonds and coupons here involved are admittedly negotiable instruments. Under the uniform negotiable instruments law ('35 C. S. A., chapter 112; C. L. '21, page 1121, chapter 66, sections 3818 et seq.) as interpreted by the overwhelming weight of authority the bondholder was not required to present the bond or coupon at maturity in order to fix the absolute liability of the maker.

"The general rule * * * is that a failure on the part of the holder to present the paper for payment on the day of maturity will not discharge the acceptor of a bill or the maker of a note; and this is true, even where the paper is made payable at a particular bank, or some other specified place; and the acceptor or maker can show that he had deposited sufficient funds to meet his obligation at the stipulated place of payment. And this rule is rigorously enforced in the United States, even where the acceptor or maker has provided sufficient funds as the stipulated bank of payment, and the bank has failed subsequent to the maturity of the paper. The loss in such case falls on the acceptor or maker, respectively, and the holder can nevertheless enforce payment of the bill or note. But where a place of payment is specified in the instrument, and the acceptor or maker can prove that he was at the place, on the day of maturity, ready to pay the amount, or had so deposited sufficient funds to enable the bill or note to be fully honored; the failure of the holder to present for payment will prevent any subsequent recovery of damages and costs, and subsequently accruing interest." Tiedeman, Bills and Notes, Page 303, section 114. Compare: Binghampton Pharmacyv. Bank, 131 Tenn. 711, 176 S.W. 1038; FederalIntermediate Credit Bank v. Epstin et al., 151 S.C. 67, 148 S.E. 713; Hanover Nat. Bank v. Norris, 151 S.C. 135,148 S.E. 718; Bank of Montreal v. Ingerson, 105 Ia. 349,75 N.W. 351 (expressly overruling Lazier v. Horan,55 Ia. 75; 7 N.W. 457); Adams v. Hackensack ImprovementCommission, 44 N. J. L. 638; Mullen Corp. v. SchoolDistrict, 99 Mont. 388, 43 P.2d 902.

[3] It is made plain by these and other authorities, especially by the ones which have appeared after the enactment of the uniform negotiable instruments law, that, unless negotiable paper is sent by the holder, for collection from the maker, to the very bank designated as the place of payment, such bank is the agent of the maker, and not of the holder, in relation to any deposit by the maker, when there is no evidence of an express authority.

New England Nat. Bank v. Dick, 84 Kan. 252,114 P. 378, cited by Pitkin county, presents peculiar facts which distinguish it from the case at bar.

[4] 3. Is there estoppel pleaded and proved? Assuming, but not deciding, that estoppel is sufficiently pleaded, we fail to find in the record any such convincing evidence as is required before this affirmative defense can be considered as established. No written or spoken words of the holder have been shown. It is argued, however, that estoppel results from a universal course of business constituted by the sending of all bonds and coupons to New York for payment there. We have already called attention to the fact that each bond or coupon is a separate contract. But the county treasurer himself, who is the only first-hand witness on the supposed universal custom, testified that "the majority of the coupon bonds were paid in New York." In other words, the very evidence offered fell short of clearly establishing a universal custom as claimed. Besides, the finding of the trial court, quoted above, says nothing about estoppel, but puts the matter wholly upon an exercise by the treasurer of the option, granted the holder, to have payment made in New York. Of course there was no evidence that the treasurer had been given such an extraordinary authority. He testified that he had no instruction from the holder here; that this holder was not among those whom he requested to make arrangements for paying at his office and who refused his request. There is not one word of testimony as to whether — assuming the option to have been exercised — the holder failed to present the securities for payment within a reasonable time after maturity. In the light of the accepted view that no presentation at all is necessary to fix the maker's primary liability, it is obvious that such a question is wholly irrelevant and immaterial. There is no substantial evidence of estoppel in the record before us, nor anything else that could sustain the judgment rendered below.

For the reasons above stated, the judgment must be reversed and the case remanded to the district court with directions to enter findings and judgment in favor of the plaintiff.

Judgment reversed with directions.

MR. CHIEF JUSTICE BURKE and MR. JUSTICE HILLIARD dissent.